An Economics Nobel For Saving Lives

By Virginia Postrel -
Oct 16, 2012

Imagine a parallel universe in which
federal law prohibited Americans from paying anyone to care for
their children, whether in cash or in some other “valuable
consideration,” and where paid child care was similarly
repugnant and illegal throughout most of the world.

In this alternate reality, family bonds would simply be
deemed too sacred and children too precious to permit the taint
of commercial transactions.

Some desperate parents would risk arrest to pay under the
table. Parents with a lot of friends and family would help each
other out. People with small social networks or loved ones in
poor health would be out of luck. A lot of parents would stay
home with the kids when they’d prefer to go out, whether to a
romantic dinner or a regular job.

The intellectual consequences are equally predictable.
Michael Sandel would use child care to demonstrate to his
Harvard University classes that there are some things money just
shouldn’t buy. The Cato Institute would issue reports showing
how the prohibition hurts poor people who would like to be
nannies and noting that the law makes an unfair exception for
school teachers. Economists would calculate how much higher
labor force participation and gross domestic product would be if
parents could pay someone else to watch their children.
Feminists would debate whether paid child care would liberate
women or subject yet another aspect of women’s lives to the
brutality of the marketplace.

Meanwhile, Alvin E. Roth, who shared this year’s Nobel
Prize in Economic Sciences, would be figuring out how to make it
as easy as possible for parents to trade off taking care of each
other’s children.

Real World

Roth, whose “market design” bridges economics and
operations research, is known for developing algorithms to find
the best available matches in real-world situations: medical
residencies, public schools and -- the analogy to my child-care
hypothetical -- kidney transplants from living donors. “He likes
to study markets that don’t involve money,” says Michael Rees, a
kidney transplant surgeon at the University of Toledo Medical
Center in Ohio who has worked with Roth on paired kidney
donations.

Some of those markets don’t actually involve exchanges.
These include medical residencies, in which both sides care
about exactly whom (or what characteristics) they’re matched
with. Each side has a ranking of its preferences, and the trick
is to get everybody as highly ranked a match as possible. Having
an auction wouldn’t solve the problem, because the highest
bidder for a given partner wouldn’t necessarily match the
partner’s preferences.

There’s no intrinsic reason, however, that the kidney
market couldn’t involve money, since a paid donor wouldn’t care
who exactly got the kidney, as long as the price was right.
About 94,000 Americans are on the waiting list for kidneys. Last
year, fewer than 17,000 got transplants, about 11,000 of them
from deceased donors. If transplant centers offered sufficient
compensation, they could enlist enough living donors to
eliminate rationing. The reasons they don’t are cultural, legal
and -- to someone more appalled by needless suffering than by
commercial transactions -- infuriating.

Roth, who recently left Harvard for Stanford, isn’t trying
to change laws or attitudes about the kidney shortage. Those may
change in the long term, but his concern is the present. “I
would not like to guess whether repeal of the widespread laws
against kidney sales is likely to happen more quickly than the
advances in xenotransplantation, or artificial kidneys, or other
medical breakthroughs that would end the shortage of kidneys,”
he wrote in a 2007 Journal of Economic Perspectives article
titled “Repugnance as a Constraint on Markets.” His approach is
incremental and technical rather than sweeping or political.

More Transplants

Yet unlike the economists, wonks and polemicists who rail
against the prohibition of organ sales, Roth can claim credit
for actually increasing the number of kidney transplants. “Alvin
Roth has been a major contributor to the fastest-growing source
of transplantable kidneys in America, and probably in the world,
through paired donation,” says Rees.

Trades without money are notoriously challenging, since
they can only take place in the unlikely case of what economists
call a “double coincidence of wants.” Without money, if you’re a
hair dresser with a broken toilet, you have to find a plumber in
need of a haircut. But those deals are easy compared to the
kidney market, in which most forms of barter are also forbidden.
A university can’t, for instance, offer tuition waivers to
students who donate kidneys to patients in its hospital’s
transplant program. The only thing you can swap for a kidney is
a kidney. In 2007, Congress passed a law explicitly making
those swaps legal. It did so because, guided in part by Roth’s
work, transplant centers were starting to arrange such trades,
called “paired exchanges.”

Many of the people on the waiting list have someone who’d
like to give them a kidney but isn’t a compatible donor. Paired
donation allows such incompatible pairs to trade. In the
simplest case, Alice has type A blood and would like to give a
kidney to her husband Ben, who has type B. Meanwhile, Bill is
type B and would like to donate to his wife Anne, who is type A.
So Alice gives her kidney to Anne, on the condition that Bill
gives his to Ben.

The earliest cases of paired donation were such simple two-
way swaps -- barter deals with the transplants done in the same
hospital at the same time, so nobody could back out. Over time,
they’ve become more complex. In a 2006 article, Roth and his co-
authors demonstrated that a chain started by someone who wants
to give a kidney but doesn’t designate a particular recipient --
a so-called non-directed or “altruistic” donation -- can go on
indefinitely. The transplants don’t have to be done in the same
place or at the same time, because no one is in danger of giving
a kidney without having a loved one receive an organ in return.

Extended Chains

The number of transplants done through paired exchanges has
also risen dramatically: from 2 in 2000, to 228 in 2008, to 443
in 2012. Extended chains, rather than simple pairs with
simultaneous operations, are now the norm. “Whatever other
policies might be adopted in the more distant future to benefit
patients who need transplants, or to reduce the incidence of
kidney disease,” Roth writes, “kidney exchange offers real gains
that have proved to be achievable.”

Several national registries, including the National Kidney
Registry and Rees’s group, the Alliance for Paired Donation,
have enlisted multiple hospitals across the country to create
large pools of potential donors. This “thick market” is
particularly important in finding kidneys for the subgroup of
“sensitized” patients for whom even donors with the matching
blood type may trigger antibodies. (Imagine finding another
parent to trade babysitting time for a special-needs child whose
care requires knowledge most people don’t have. The more parents
in the pool, the better your chances.)

In a July working paper for the National Bureau of Economic
Research, Roth and his co-authors reported that highly
sensitized patients made up more than half those registered with
the Alliance for Paired Donation, compared to only about 10
percent of the national waiting list. Now Roth is working to
demonstrate how transplant centers could be better off by
entering more of their patients in the registries, rather than
hoarding the easy-to-match ones while dumping the sensitized
patients into the pool. It’s another example of taking one
problem at a time -- and of working around the inherent
clunkiness and warped incentives of a barter system.

Depending on how you look at it, Roth’s incrementalist
approach can be either disquieting or inspiring. Comparing the
hundreds of paired-exchange transplants to a waiting list
rapidly approaching 100,000 people points to just how crippling
the ban on payment is. If the only way to get a babysitter were
to take care of that person’s kids yourself, a lot fewer parents
would leave the house -- no matter how ingenious the scheme for
matching available child-care hours.

But some would find help and that, too, is part of the
story. A few hundred extra transplants may not be a revolution.
But if you’re one of the people for whom Roth’s algorithms find
a donor, it’s a whole new life.

To contact the writer of this article:
Virginia Postrel at vp@dynamist.com.